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Wheat Growers Look to Iraq for New Market

(Sunday, April 6, 2003 -- CropChoice news) -- Willie Vogt, Farm Progress, 04/04: The U.S. is shipping 56,500 metric tons of wheat to the Iraqi people, with another 150,000 tons more on tap in the next couple of weeks. U.S. Wheat Associates says that the supply includes hard red winter wheat that was once bought in large quantities by Iraq.

Alan Tracy, president of U.S. Wheat Associates issued a statement this week about the Iraqi wheat situation noting that some exporters are worried about losing their market positions with Iraq. Tracy notes that humanitarian assistance in the Iraqi situation is complicated now because so many countries want to help, which is good news for Iraq.

"Beyond the desire to help, however, a monopoly wheat exporter who shall remain nameless - oh okay, you twisted my arm, it's the Australian Wheat Board - is quoted in the press almost daily, voicing fears that they are going to lose the wheat contract they have with Saddam's regime," Tracy notes. "To be fair, folks at the AWB are not the only ones with mercantilism on their minds during this most dangerous time: some analysts and reporters in the U.S. are playing the "what if" game about the future commercial wheat market even while bombs are hitting Baghdad."

Tracy says it's "silly to fight over a market that isn't a market yet." He says the Iraqis need three things first:·Food, water and medical supplies.·The help of the world to get Iraqi lives back in order.·The right for the Iraqi people to determine for themselves what kinds of wheat they want to purchase in the future.

He notes that U.S. Wheat Associates will work to pick up "where we left off at the first Gulf War. Prior to that, U.S. exporters shipped nearly a million tons of wheat each year to Iraq."

The following comes from the Agribusiness Examiner.


WARREN VIETH, LOS ANGELES TIMES : Some say the conflict in Iraq is all about oil. But for Mike Bouris, Paul Overby and Colin Nicholl, the stakes are measured in bushels, not barrels. The wheat they grow is pitting Americans against Australians in one of the first skirmishes over postwar business opportunities in Iraq.

Bouris, who tends 6,000 acres of winter wheat in Riverside County, and Overby, who's about to seed 580 acres of spring wheat in North Dakota, are among the 250,000 American farmers who stand to profit if Iraq is opened to U.S. wheat exports.

Their gain could come at the expense of Nicholl, who harvests grain and raises sheep on 16,000 acres in Australia's wheat belt. Australia has been Iraq's biggest wheat supplier since the 1991 Persian Gulf War, and its farmers fear the loss of sales if a pro-U.S. regime is installed in Baghdad.

The three farmers find themselves in the middle of a brewing trade dispute. Experts say it may be the first of many as U.S. businesses compete for markets in Iraq from agriculture to telecommunications. Like the debate over Iraqi oil, it is contributing to suspicions that the U.S.-led war is motivated in part by financial interests.

Those suspicions are especially high in nations such as France, Germany, Russia and China, where opposition to the war in Iraq is widespread. But even allies like Australia, one of a handful of countries contributing troops to the U.S.-led war effort, see trouble too.

U.S. farmers are backing a Bush administration initiative to ship up to 600,000 tons of U.S. wheat to Iraq as emergency food aid, a move that could pave the way for commercial exports worth at least $150 million a year.

"Any chance to regain an export market is really important," said Overby, 44, who farms with his wife, Diane, about 30 miles south of the Canadian border in Rolette County, North Dakota. "Iraq would certainly be a nice one to have back on the U.S. side."

Australian wheat farmers are pressuring their government to keep the Americans at bay, and have threatened to seek compensation if that fails.

"America is extremely good at looking after America," said Nicholl, who heads a federation of 9,000 western Australia farmers. "That's fair enough, I suppose. But on account of that, we're expecting the Australian government to ensure there is as level a playing field as possible."

The playing field is certain to grow more crowded. U.S. rice farmers see a similar opportunity to sell in postwar Iraq, and experts predict growers of corn, barley, beans, cotton, meat, milk powder and other farm commodities will not be far behind.

The overthrow of Saddam Hussein's regime could open Iraq's markets to a wide range of U.S. commercial transactions currently prohibited under an executive order signed in 1990 by President Bush's father. U.S. exports to Iraq in 1989 totaled $1 billion, including more than $900 million in agricultural goods, according to the U.S.-Iraq Business Council. But in recent years, there have been essentially none.

U.S. telecommunication firms, for example, including San Diego-based Qualcomm Inc., are pressing the government to ensure that the reconstruction of Iraq's phone network incorporates a wireless technology they favor, instead of a rival system backed by European firms. Their cause has been taken up by Rep. Darrell E. Issa (Rep-Vista), whose district is near San Diego.

Administration officials insist that the potential to expand U.S. commercial trade has no bearing on the decisions they make about Iraq. "We're not even thinking about it at this point," said Alisa Harrison, spokeswoman for Agriculture Secretary Ann M. Veneman. "The focus is purely on humanitarian assistance and having a successful outcome of the war."

But agricultural experts say the U.S. has used food aid in the past to introduce foreign markets --- such as Indonesia --- to American farm products.

"Through history we've seen examples of where food aid has helped turn a market into viable, cash-paying customers," said North Dakota Wheat Commission spokeswoman Ellen Huber. "If we see the oppression lifted and a freer economy in Iraq, we would hope they might one day become customers."

As customers go, Iraqis used to be among the best. Before the Gulf War, America's wheat farms supplied nearly half of Iraq's grain needs. It was a major market for U.S. rice exports, and an important buyer of American sugar, eggs, oil, beans and livestock feed.

All that ended with Iraq's invasion of Kuwait in August 1990. After the U.N. instituted the "oil-for-food" program in 1995, which allows Baghdad to sell oil to buy food and humanitarian goods, other countries filled the vacuum left by U.S. exporters barred by their own government from doing business in Iraq.

Australia came to dominate the wheat trade and provides about 2 million of the 3 million metric tons Iraq imports annually, reaping $500 million a year. But the oil-for-food program was suspended in the days leading up to the war, and now has been restructured under the authority of U.N. Secretary-General Kofi Annan. It remains unclear whether the commitments Australia negotiated with Hussein's regime will be honored. The Australians say they are not about to cede the wheat war.

"We expect, post-hostilities, to move back into that market and sell that wheat," said Peter McBride, spokesman for AWB Ltd., formerly the Australian Wheat Board. "We'll do everything possible to keep that market share."

Officials in both countries express hope that Iraq's appetite for imported grain will increase substantially after the war is over, allowing Australia to retain its share and giving America a shot at the expanded market.

American wheat farmers could use the business. U.S. farm income fell 22% last year, according to the Agriculture Department. Wheat exports are expected to decline to about 25 million tons this year, the lowest level since 1972, in the face of new competition from Russia and other low-cost producers.

Prices have fallen too, from last September's drought-induced high of $4.89 a bushel for hard red winter wheat to Friday's close of $3.16. Government subsidies are designed to ensure that U.S. farmers receive the equivalent of $3.86 a bushel no matter the market price, but farmers say even higher prices are needed to operate a farm profitably through good years and bad.

"Something in about the $4.25 range would give guys a chance to be more aggressive in keeping their equipment improved and having some extra dollars available for other things," said Overby. "That's not a get-rich price."

Agricultural analysts say that if Iraq's market opens up, the United States should be able to recapture its pre-1990 market share of about 1 million tons a year. At current prices, that would generate $150 million in annual sales. But the impact on market prices would be disproportionately larger, economists say. A four percent increase in U.S. exports might boost prices by eight percent, or about 25 cents a bushel.

"Any time you can remove some wheat from the market, you're going to strengthen the price. That's the big, big picture," said Bonnie Fernandez, executive director of the California Wheat Commission. "You're moving product out and creating demand."

And a rising tide tends to raise all grain barges, even for farmers who grow wheat that will never make its way into Iraqi flat bread.

"If producers in Northern California or Kansas or wherever aren't able to export, they're going to try to sell in my market," said Bouris, 51, who farms with his father, Herk, and cousin Pete on 6,000 acres of leased land near Menifee. "So it has an indirect benefit to me to try to raise the wheat market in general."

Yet both he and Overby say that putting bread on the tables of hungry Iraqis is more important than pumping up profits.

"Truthfully, I'm more concerned about getting some food aid to them than I am about the export market," said Overby, whose fellow North Dakota wheat growers donated 50,000 bushels of grain last year to help feed widows in Kabul, Afghanistan.

"I just hope things work out in Iraq," said Bouris. "We just need to get them some food, that's the main thing.